Casino operatorCaesars Entertainment has lost its bid to amend a federal law that would have allowed it to ignore creditor lawsuits while restructuring its bankrupt main unit.

On Tuesday, the New York Times reported that Sen. Harry Reid (D-NV) had withdrawn a provision of the federal $1.1 trillion spending bill that would have altered the Trust Indenture Act, a Depression-era measure that dictates what bankrupt companies can and cannot do to get themselves back on their feet.

The amendment first appeared in November, when it was attached to a federal transportation bill. Critics, including Tea Party types and the creditors the bill would end up screwing, raised a sufficiently loud ruckus to get the amendment pulled. But Reid is retiring next November and no longer cares what the electorate thinks of him, so he reattached the measure to the spending bill.

On Monday, a disparate group including asset managers, legal scholars and Tea Party types issued an appeal to Congress to reject Reid’s farewell gift to Caesars. These critics pointed out that Reid’s desire to bail out Caesars would have ramifications far beyond the gaming world and wondered why such sweeping changes were being considered without any public debate.

Caesars is principally owned by two large hedge funds – Apollo Global Management and Texas Pacific Group (TPG) Capital – who loaded up on around $30b in debt to buy Caesars just before the 2008 economic meltdown took the wind out of the US casino industry’s sails.

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